The royal carpet will be out next week for Vladimir Putin, the enigmatic moderniser with a KGB past, on the first state visit by a Russian leader to Britain for a century. But two new images colour the message of peace and partnership he hopes to project.

On Russia's national day last week, military jets screamed over Red Square while the president and an invited crowd watched below. Heavy missile-carriers regularly rumbled over the cobbles in cold war times but not since 1956 had low-flying fighters been allowed to risk the safety of central Moscow. Putin has gone back to massaging national pride with symbols of military might and superpower nostalgia.

The second defining image appeared in a London court-room a day earlier. Sergei Kovalev, Russia's first national ombudsman, was telling a British judge to mistrust Moscow's promises that a leading Chechen politician would get a fair trial if extradited to Russia.

"In my country defendants are often subject to beatings and torture, usually in the first stages of investigation. If it happens often with Russian citizens, it almost always happens with Chechens," said the crumpled academic figure, who spent years in Soviet jails. The judiciary, he went on, was still far from independent and three prominent Chechens had died mysteriously in Russian custody, along with hundreds of ordinary civilians.

No one doubts that Putin wants to move his country forward. "We can make Russia an economically strong country and a democratic power open to the world," he told parliament last month.

Russia's economy is doing well in broad terms, with 4% growth in 2002 and a similar rate so far this year. While capital flight continues at a rate of $1bn (£600m) a month, the exodus is more than matched by foreign investment and Russian-owned money coming back in. For the first time in a decade, this year will see a net inflow.

The freedoms of speech, travel and public protest that Russians recovered 15 years ago now seem irreversible. No serious politician advocates their dismantling and Vladimir Zhirinovsky, the semi-fascist who caused a panic in the mid-1990s by getting substantial support in two national elections, is seen as a venal buffoon.

Internationally, Russia is desperate to be accepted as part of Europe and the "west". Although Putin still pursues the Gorbachevian ideal of a multipolar world in which US power will be restrained, in practice he has made substantial concessions to Washington.

The "new" states of eastern Europe that Donald Rumsfeld is wooing still fear the "old" Russia that liberated/ occupied them in the past, but in Russia itself the mentality of domination is over. The displays of military hardware that Putin and his entourage were watching in Red Square are designed for the domestic audience as well as being a sort of "Farnborough-in-Moscow", a showcase for Russia's ability to compete in at least one hi-tech area with the world's other big industrial powers.

But Putin's rule contains two major problem areas. One is the increasing concentration of executive power in the Kremlin at the expense of an emasculated parliament, as well as the inordinate influence of business over politics - not just in Moscow but in local city councils and the resource-rich regions. In the early 1990s it was easy to ridicule the few observers who argued that Russia's authoritarian traditions would outlive the fall of communism. Now their views are widely accepted. Yet there is still a complacent view that progress in Russia, while slow, is on the right track.

Social indicators do not bear this out. Every international human rights organisation, as well as Russia's own, points to backward movement. The monitoring group, Freedom House, says that by several measures - the openness of the electoral system, the vigour of civil society, the independence of the media, the quality of governance, and the judicial and legislative frameworks - there has been a slipping back in the last seven years. In other words, Putin has failed to halt the distortions which began after Yeltsin was shoe-horned into a second presidential term in 1996 with the aid of lies and blatant manipulation on all the national TV channels.

Russia's neo-liberal reforms have created widespread inequalities, and the increasing need to pay for decent medical care and education have left many Russians outside the small middle-class worse off economically. Coupled with the draining of democracy, this has left millions of Russians in traditional passivity. Recent economic growth has allowed wages and pensions to be paid more or less on time, and the rouble remains strong; but the engine is high international oil prices rather than a firm revival of Russian industry.

The second problem area is the war in Chechnya. It is not a sideshow, as Putin seems to have convinced Tony Blair and other EU leaders. It eats away at Russia's social health, forcing parents of teenage boys to try to find an escape, corrupting Russia's army and police and giving a green light to cruelty rather than to common sense and compromise. It also helps to maintain a climate of mistrust among Russia's European neighbours.

A year ago, there were slight hopes of a renewal of talks between Putin's representatives and those of the last elected Chechen leader, Aslan Maskhadov. With Kremlin backing, former prime minister Yevgeny Primakov wrote a powerful article complaining that some Russian officers made money out of a black market in weapons and hostages, and urging negotiations with Chechen field commanders.

The "war camp" among Putin's advisers dashed those hopes and the president launched a policy of "Chechenisation". A phoney referendum on a new constitution was pushed through in March, allegedly with a turnout of 85%. Fortunately, no international groups agreed to observe this nonsense. In December a Chechen president will be similarly "elected". The Kremlin's favoured candidate, Akhmed Kadyrov, has already created a militia of several thousand, based mainly on his own clan. Desperate Chechens are tired of insecurity and killing, but they now face the prospect of civil war as well as a struggle with the Russians.

Why Putin insists on continuing an endless and corrupting war is the main riddle about him. He has no credible rivals and without risking his own power could easily pursue dialogue with all the Chechen factions on a ceasefire, a programme of autonomy and reconstruction, and the withdrawal of Russian forces. This is what his fellow leaders in the G8 should constantly be telling him, not as a ritual item nine on their list of talking points but as priority number one.

· The ICA in London is showing a special series of films on Chechnya next week